Housing Permits Grow at Significantly Slower Rate
According to the Census Bureau, there were 85,200 housing permits filed in August 2013. Housing permits grew at a rate of 9.7% compared to last August. This is the first time that the month-over-month rate of growth in housing permits has been in single digits since December 2011. The annual rate of change has fallen to 27.0% from its peak of 32.6% in January 2013. Housing permits are significantly up from the bottom in 2009 through 2011, but they are struggling to climb our of previous housing recession territory.
In the current environment of zero interest rates from the Federal Reserve, the real Fed funds rate is a good leading indicator of housing permits. The real Fed funds rate has been trending down year over year, but the trend is mild and just a few months old. A continued decline in the year over year change in real interest rates would be positive for the housing market.
We use housing permits as an early leading indicator for the following industries: appliances; custom processors; furniture; hardware; HVAC; off-road and construction machinery; petrochemical processors; plastics and rubber; pumps, valves and plumbing products; textiles, cloting and leather goods; and wood and paper products. In general, housing permits are a very good leading indicator for the production of plastic product.
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